Insurers Confab Mulls NCOIL Market Conduct Model

NCOIL, based in Albany, N.Y., has expressed the hope that its Market Conduct Surveillance model act draft will be adopted shortly, perhaps at its next meeting in San Antonio, Texas, on Feb. 26-29.

Both NCOIL and the National Association of Insurance Commissioners, Kansas City, Mo., are working on market conduct reform.

The work is at least partially in response to a call by the General Accounting Office in Washington for more action in strengthening the current system of market conduct oversight.

Linda Lanam, vice president-annuities, with the American Council of Life Insurers, Washington, in advance of the meeting, told National Underwriter that insurers would be discussing points that the parties can agree on so that legislators will be able to focus on work that still needs to be done.

Creating definitions in order to establish uniform, consistent standards will be an important discussion, Ms. Lanam added. This is important to life insurers that conduct business on a nationwide standard, she said.

For example, Ms. Lanam said, market conduct analysis needs to be defined and could use language that currently exists in the model draft.

Confidentiality of information shared among regulators is also a concern for member companies, according to Ms. Lanam. This needs to be achieved so that confidential information does not become the subject of litigation and without letting companies that act badly receive the same protections as companies that are doing the right thing, she explained.

An issue that will also receive discussion is what sort of due process or appeals mechanism is given companies for an appeal of a third-party contractor examination or to contest the billing amount for the examination, according to Don Cleasby, a vice president with the new Property Casualty Insurance Association of America, Des Plaines, Ill.

PCI is the new entity resulting from yesterday's merger vote by the National Association of Independent Insurers and the Alliance of American Insurers, Downers Grove, Ill.

Insurers, he said, would seek a process ensuring that before a bill was sent to an insurer, it would be reviewed by the state's insurance department.

A draft just released by NCOIL is getting closer to something that could receive wide support, Mr. Cleasby added.

If, according to Lenore Maremba, a vice president with the Alliance, enough progress can be made so that the model is adopted next month, then it could be introduced in this legislative session in some states.

But issues that insurers are being asked to look at, including the issue of domestic deference, where a state of domicile would take the lead on market conduct reviews, need to be discussed first, she said.

According to Ms. Maremba, in order for there to be strong reliance on domestic deference, there needs to be strong market analysis in place that would make states comfortable with letting another state take the lead on market conduct.

The meeting among the trades is important because it allows everyone to put their cards on the table and see what kind of support can be offered and what work insurers still feel needs to be done, explained Dave Reddick, state affairs manager with the National Association of Mutual Insurance Companies, Indianapolis.

The issues that have been discussed and the work done at the NAIC needs to be embodied in a model, he added. Absent a law, states and regulators are going to do different things, Mr. Reddick said.

Another important point is the recognition of the need for a self-evaluative privilege in a drafting note of the proposed model, he noted.

NCOIL has done an "excellent job" of balancing consumer and industry interests, according to Kevin Hennosy, a consumer advocate and publisher of SpreadtheRisk.org, Kansas City, Mo.

Mr. Hennosy said the domestic deference issue is really a matter of domestic accountability where states would rely on a domestic state to take the lead in market conduct oversight of a company.

The NCOIL model is important, he continues, because it builds a framework.

A recent removal of a whistleblower provision in the model should not have a major impact on insurance regulation since there are whistleblower laws in many states, according to Mr. Hennosy. And, if a need does develop, a separate model can be created, he added.

Birny Birnbaum, executive director with the Center for Economic Justice, Austin, Texas, said that the whistleblower provision should be put back in the model because it is important in identifying agents who are not acting properly.

The current model, according to Mr. Birnbaum, "is a grab bag for insurers for putting up roadblocks in front of regulators."

Efforts to create a model need to focus on "what is the model doing?" he added.

What it should be doing, according to Mr. Birnbaum, is to perform market analysis, make sure there is a minimum level of resources for regulation and make sure that the commissioners get the information they need.

The AAHP/HIAA, a health insurance trade group in Washington, is supportive of both the NCOIL and NAIC efforts, and will be reviewing the latest NCOIL draft, according to Mohit Ghose, a spokesman.

Mr. Connolly is a senior editor with NU's Life-Health edition.